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Grim Picture for Main Street

October 12, 2020

We’ve seen big-firm bankruptcies, like those of JC Penney and Hertz, grab the headlines. But those “big time” bankruptcies are being swamped in number by the scores of small- and medium-sized firms filing for bankruptcy every day.

 

When small companies go out of business, there is no fanfare. There’s barely a whimper. Most of the time, the owner turns the keys in to the landlord and walks away.

 

Chapter 11 bankruptcy soared by 26 percent in the first half of 2020 as companies tried to protect themselves from creditors during the pandemic. U.S. courts recorded a total of 3,604 businesses filing for bankruptcy in the first six months of 2020.

 

In February, a new form of Chapter 11 bankruptcy was introduced to allow small businesses to go through the process quicker and with less paperwork. Under those stipulations, an additional 500 businesses have filed.

 

It remains to be seen how many of these businesses will reorganize and carry on. Unfortunately, the pace of bankruptcies is expected to increase as relief funds like the Paycheck Protection Program run out.

 

On top of that, according to the New York State Restaurant Association, nearly two of every three restaurants in the state will close before the end of the year without some form of financial assistance. Restaurant owners list commercial rent relief and an increase in indoor dining capacity as two ways the government could help.

 

Personally, I think the number of bankruptcies will increase as the year goes on. Circumstances and data point to worse days ahead. Please understand though, I’ve never wanted to be more wrong in my life.

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This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. Please consult with a professional specializing in these areas regarding the applicability of this information to your situation.

Andrew Wood, Dan Simon and Alison Slezak are Investment Advisor Representatives. Advisory services are offered through CoreCap Advisors, LLC., a Registered Investment Advisor. CoreCap Advisors, LLC and Daniel A. White & Associates, LLC are separate & unaffiliated entities. 

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